Hope Springs Eternal

It’s snowing here in Chicago, but I’d like to think of spring. I’d like to think of warmer, better times and I’d like to be hopeful for the future.

Monday’s post has elicited a lot of comments and they are still coming in. Please keep commenting. The more the merrier and I encourage readers to consider writing their own version. I may post it as a standalone versus a comment. I am also glad to consider stories about great mentors, honorable partners, honest clients, friends forever, interesting service projects.

Really. I am. Just don’t be too warm and fuzzy and be willing to have me verify your name and position.

I had a very long conversation yesterday with an old friend from my JP Morgan Latin America days. My friend is a very interesting guy and is hopefully coming to visit me soon here in Chicago. He’s a capital markets specialist, and has particular expertise in controls over derivatives trading and controls and monitoring of an organization’s exposure to derivatives, both on and off exchange traded. He has been reading my blog since returning to New York after a few years in a Buddhist retreat. Interestingly enough, he told me, “The more things change, the more they stay the same.” I’m encouraging him to write a guest post.

While we were talking, he asked me, “Francine, do you have any hope for the Big 4?”

I get this question all the time in the comments: “Francine, Enough of the problems. What is your solution?” And while I have only hinted at my views on the ultimate solution, I will say this: I do find many reasons for hope when talking with professionals at the beginning of their careers.

I receive mail every day from professionals at all levels, some agreeing with my views, some looking for advice and some with their own stories to tell. Those professionals who are still in school or right at the beginning of their careers are a very savvy bunch. To be recruited by the Big 4, you have to be a top student. That’s a given. They have the highest grades, are well rounded, and involved in leadership and extracurricular activities. But this generation, who I won’t label with any letter of the alphabet, is much sharper and much less willing to accept the status quo than any other generation, in my opinion.

They found my blog and read me because they are hungry for information about their chosen profession and they spend 24/7 looking for it. The internet makes that so easy. They seek information in order to make the best choices of firms, of offices or specialties, of assignments, of virtually every aspect of their future careers. They are ambitious but realistic. They are realistic but still hopeful. They do not readily kowtow to authority figures.

However, they are still accounting students at heart. That means they are detail oriented and a little more conservative in that they are risk averse to making mistakes. They want to know if they are being paid fairly. They plan on asking questions. They are not afraid to send a partner an email. Why not? They have such an enthusiasm for being excellent that it is a shame to see it stifled by the need to conform or to be accepted into a more rigid, standardized environment.

But they are willing to play along, for a time, in order to achieve their goals. And, boy oh boy, are they goal oriented. They have worked hard, sacrificed a social life, spent a lot of their own or their parents money, often on graduate degrees, and they want the return on their investment.

Can this savvy, smart, worldly, more “aware of their options” generation stick it out, last long enough to change the audit firms for the better? Or will the ones who understand their options, have done their time, gotten what they need from the process continue to opt out before taking on management responsibility ?

It’s a given that attrition is high in the audit firms because it is still an “up or out” process and that choice is sometimes made for you. Many in prior generations always expected to leave after a few years anyway in order to fulfill their broader ambitions and work in an environment that continues to encourage and utilize their enthusiasm.

It would be nice to think that the sheer numbers of new recruits with this different attitude will force change to occur. More of the type of young professional I am describing here are now in the talent pool being recruited. Can they stick it out, charge through, and succeed without compromising too much of their idealism, in spite of the indoctrination that pounds the high expectations, “non-conformist” attitude out of them every step of the way?

Maybe not.

Maybe, as in the past, those that raise their hand, wave it, and expect to be heard rather than waiting to be called on will leave the profession before taking on management responsibility.

The management of the audit firms will continue to be left to those that go along and get along, who become as Tenacious Truman has described, “…quiet, non-boat-rocking types who would agree with (and support) current leadership: quiet managers and solid citizens with noses firmly to the grindstone (as opposed to criticizing leadership’s decision-making).”

I see and hear from so many young professionals who dearly want to be accountants and auditors, want to work for the firms, but also want them to change. Will they instead start to make other choices? Will we see them reject the premise that has been driven into them by accounting professors in their universities since they started their studies – the premise that the Big 4 is the only worthwhile employer for the best and brightest accounting graduates?

The reductions in force, as a commenter said recently, are causing many to pause and reconsider the Big 4 as a career choice, even for the first few years. They see the firms cutting professionals who have only a year or two under their belt yet continuing to hire more graduates. The guts of the leverage model are hanging out in the open and it’s not a very appetizing sight.

Will competition for recruits be a driver for change?

Is it possible for those that continue to choose the Big 4 to change the firms from within?

What do you think?

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Wow, Francine, I wasn’t expecting this post to take such a wonderful turn at the end.

It’s a great thought; little accountants running around revolutionizing the industry with forward-thinking images of change and the drive required to implement those changes.

It will be exciting to see if anything is transformed but in the meantime, I’d wager that there will only be more blood-thirsty recruiters after sacrifices for their giant corporate altars.

Competition will definitely be a factor moving forward; and hopefully the best and brightest of today’s accounting students will also be the ones with the best ideas on how the industry can improve from the outside in.

Will love to see what sort of input you get from your other readers on this one…

Brilliant post! My favorite since I’ve been reading this blog. I love your blog Francine but it at times seems too cynical for me. This post is a very welcome change. I’m a student entering a Big 4 firm next year. Reflecting on my own views and those of my peers and friends taking the same path, I would wholeheartedly say that your post is dead on. I hope I can be one to “change the audit firms for the better”.

@355…not to be a cynic but don’t pat yourself on the back until you’ve fought it out in the trenches and have some war experience. Until then you are just fresh faced and full of idealism and that doesn’t mean squat…that is if you make it that long and survive the RIFs…don’t surprised if offers get rescinded in certain markets. Keep that GPA high son!

Here’s a suggestion (I spend 2 hours each day in the car traveling to/from my client to think about these issues)

Staff Compensation – Currently, staff comp is based on a mystery ranking which then is put into a mystery formula and a raise/bonus is given. How about setting some goals based on certain measurements. For example, if you accomplish X you get Y bonus. This could be based on utilzation, etc. I people in sales are often given bonuses based on certain metrics (i.e., sell 5 cars a month you get a $1,000 bonus).

By the way, I hate the utilization metric and think it is outdated so I’m not recommending a metric based solely on utilziation. I mean if I do something efficiently is there any reward other than more work on a different project? Plus, if my utilization is high but the partner isn’t collecting the fees do I deserve a bonus for being highly utilized? What if the partner underbid the project?

I found your blog while doing research on PwC’s relationship with AIG for my grad school audit class and I now read it everyday.It has helped me gain a greater insight into the profession I plan to enter(I interned at EY Seattle this past summer and will start full time in August). I can hope that my generation can achieve the change that you describe. Thanks, and keep writing!

As someone who tested the waters at the Big-4 as an undergraduate and had to take a breather for my own sanity and feeling of self worth, I really hope that change is possible. I am going back to the firm because the people I worked with there were all amazing. While it is sad that many of them have moved on, it is my hope that the new group will be just as interesting. Does that mean that I’m a company man (is anyone these days?) and will stick it out, I’m not sure.

I like the analogy of the big-4 versus industry as the IBM versus Silicon valley start-ups like Apple at the beginning of the computer/internet revolution. While the firms have enjoyed, and continue to enjoy, a monopoly on accounting students because of their size and reputation, I think your fears will have to be addressed and change will have to happen on all levels or they will be out-innovated by up-and-comers and new recruits will no longer be willing to make the same sacrifices to make the big-4.

Pipe dream. Neither competition nor new associates can change the Big 4. It takes a while to figure out what is going on in an audit career – up to 5 years to get the big picture, hence new associates cannot grasp it that quickly. I often suspect that the Big 4 defenders on here have just began their audit careers hence do not appreciate the big picture. Auditing is almost an impossible industry to bring down. It will always be a high paying, solid career path proposition, which is irresistible to the average manager, let alone new associates. Lets face it, at the end of the day, other than scientists, artists, and a few others, we all work to pay the bills, take care of our families, and acquire assets/save for retirement. Maybe also spoil ourselves with material things and the odd vacation. 99% of human beings don’t have the guts to rock that boat given these basic human desires/responsibilities. The only thing that could change the Big 4 is, as Francine has hinted in the past (if memory serves me right), an overhaul of the entire audit model, maybe some spectactular audit (or audit firm) failures, etc. There must be control/reduction of the human element (greed, intimidation from partners and clients, etc) in order to change the profession. In addition, auditing is a tough profession. In needs a smart brain and some of the failings are just human e.g., a complex issue not identified during an audit. I have seen some very senior and experienced people in Big 4 audit firms who still don’t appear to know what they are doing. The problem seems particularly bad in the US – maybe its the relatively easy CPA qualification (compared to other countries) or its the focus on rules over the substance of transactions. Oh well, i just don’t know what can be done to change the profession, but SOX seemed to be a step in the right direction (especially the independence/prohibited services element of it).

I believe that that last serious effort to reform, in a fundamental way, the profession was undertaken by Andersen. It was an act of desperation, fueled by the imminent prospect of dissolution. If memory serves, the firm hired coach John Wooden as a spokesperson and hired/appointed Buddy Volcker to lead the transformation effort. (An episode that is missing from many current Volcker biographies, FYI.)

My feeling is that the firms won’t make the fundamental changes that are needed, unless faced with similar external pressures.

I recently discovered your blog. Nice work! I was a manager at one of the Big4 and got laid off half a year ago. I had been with the firm for almost four years and I was told its due to my performance. Of course I know it’s not true but I didn’t take it personally. The only thing I missed the firm is the staff I had, they are young and full of energy. It’s so sad to see how they have changed as they climbed up the ladder.

Sure, they start as revolutionaries thinking about making an audit utopia until the actual fighting starts. One of them gets noticed by a higher up who happens to agree, provided this fight gets him a spot in leadership. Next thing you know, this first year senior associate is working as the muscle for the aforementioned partner benefactor threatening first years with violence and poor ratings if they don’t toe the new party line. Ultimately the senior misses the restructuring meetings and goes to another firm where no one cares what they have to say and they get RIF’ed out of the job. Thirty years later, undergrad accounting students wear cheap t-shirts with this senior’s silhouette printed on them while conveniently forgetting all the horrible things he did while talking about how much better it was when the people could determine their own GAAP and didn’t have to put up with the imperialist IASB.

I’ll say “wow” too, like so many other posters. But for different reasons. I am disappointed in the recurring cynicism of this blog. And the discouragement to new entrants to the profession is sad.

I would like to share some thoughts with those who might be considering this profession. As a professional auditor (for over 30 years) I am fiercly proud of my profession, yet never satisfied with its results. A good professional always strives for continual improvement. It is a professional responsibility of every CPA to contribute to making our profession better. I have never seen cynicism improve anything, other than the cynic’s ego.

While it is easy to sit on the sidelines and criticize, many of us do not fit your descriptions of “go along and get along”. For those of you just joining the profession, I know of no other vocation where honesty and healthy skepticism is so important AND accepted. Sure, there are always too many people who keep their heads down – show me a place where that does not exist. But less so in public accounting. In fact, being direct, honest and outspoken has only advanced my career, not placed limitations on it.

This is a profession where intelligent challenge can be encouraged and nurtured. I will agree it never happens enough. Anywhere. But where does it happen more than in public accounting? And where would you be better suited to develop your skills at critical analysis, skepticism and business integrity? Will you work hard? You betcha. Will everything be perfectly fair? Nope, no organization is perfect; but it will be more fair than most anyplace else you could name. I beleive the public accounting profession to be a great place for a principled financial professional to begin a career, or like myself, spend a working lifetime.

I wish those of you considering starting careers all the best. And wherever you work, always strive to make your organization and its business practices better than you found them – you will find it quite rewarding.

Thanks for your comment. I welcome counterpoints to my posts. As I have explained before… It’s not that I don’t know and have good feelings towards accounting/audit professionals or the profession. My blog is about the business of the Big 4. It’s the business model, in my opinion, that’s bankrupt.

however, if you’re so proud of yourself and your profession, why “anonymous?” At least I put my name on my opinions. I’d be glad to have you develop your experience into a guest post. But you would have to identify yourself, at least to me.

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Francine McKenna (@retheauditors) is the Transparency Reporter at MarketWatch.com, a Dow Jones publication, where her work is also featured frequently in the Wall Street Journal. McKenna had more than twenty-five years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad before becoming a journalist. Look for her prior columns, "Accounting Watchdog" at Forbes.com and "Accountable" at American Banker. For more information, click "About" at the bottom of this page. For more information contact Francine McKenna, fmckenna@mckennapartners.com